Apple bonds listed on Taiwan’s OTC market

TAIPEI — Apple Inc., the U.S-based consumer electronics giant, listed US$1 billion worth of bonds on Taiwan’s over-the-counter (OTC) market on Friday, according to the Taipei Exchange, which operates the local OTC market.
It was the second time Apple has sold bonds to raise funds in Taiwan, after the U.S. company issued US$1.38 billion in bonds on the local OTC market in June 2016.

The second tranche of US$1 billion in bonds with a 30-year maturity sold by Apple carried a coupon rate of 4.3 percent, higher than the 4.15 percent offered in the first bond sale, with the U.S. Federal Reserve raising its key interest rates in December.

The latest Apple bonds are callable bonds which investors can redeem three years after the sale at the option of the issuer.

Apple is expected to use the proceeds from the bond sale in Taiwan for its share buyback program or to dole out cash dividends to shareholders, market sources said.

The bond sale is being managed by the Taipei branch of Deutsche Bank AG, while Goldman Sachs, Morgan Stanley and Merrill Lynch, Pierce, Fenner & Smith Inc. are serving as structuring agents.

Before Friday’s listing, several major life insurance companies had rushed to subscribe to the bonds and accounted for more than 96 percent of the new Apple bonds, in the expectation that the Fed’s rate hike cycle will continue to boost returns, the sources said.

Taiwan’s life issuers which are sitting on plenty of cash are seeking investment opportunities to park their funds and the Apple bonds represent an excellent investment option for them, the sources said.

In 2016, when Apple issued the first tranche of bonds in Taiwan, local life insurers were equally keen to buy, ensuring the first bond sale generated more than the US$1.2 billion Apple targeted due to strong interest from Taiwanese investors.

After witnessing how well the latest Apple bonds were received in Taiwan, several international brands, such as U.S-based telecom operator AT&T Inc. and U.K. counterpart Vodafone Group Inc. as well as American pharmaceutical giant Pfizer Inc. have expressed interest in issuing bonds and raising funds in Taiwan, the sources said.

So far this year, a total of 35 tranches of bonds denominated in foreign currencies worth about US$13.08 billion have been sold in Taiwan but no bonds were denominated in the Chinese yuan, according to the Taipei Exchange.

Since Taiwan allowed companies to issued foreign currency denominated bonds on the local market in 2006, the value of outstanding bonds in 412 tranches, including bonds denominated in the yuan, have totaled US$107.47 billion, the exchange said.